Storm Over UTMB

What happened to the heart of Texas health care?

UTMB's John Sealy Hospital has reopened 200 beds, but not for the uninsured.

“UT stops for no Storm!” – UT Board of Regents Chairman Beauregard Bryan in a telegram to UTMB after the Galveston hurricane of Sept. 8, 1900.

“We regret to inform you that [your] UTMB physician will be discontinuing his/her professional relationship with you due to the devastation caused by Hurricane Ike.” – UTMB letter to the uninsured seeking care after Hurricane Ike, Jan. 13, 2009.

In the least-insured state in the nation, Terry Gamble’s story is all too typical. Her husband works full-time as a heavy machine operator while Gamble, who’s 44, stays home to take care of their two children. His job provides health insurance, but with only one salary, they can’t afford to put Terry and their children on the plan. So like 5.2 million Texans-a quarter of the state’s population-the Gambles can only hope for the best.

If you’re lucky, you don’t get sick and your children stay healthy. Terry Gamble hasn’t been that lucky. Her 12-year-old son Tevin was diagnosed with a rare neurological disorder called Kinsbourne syndrome when he was 9 months old. His chronic illness requires that he be seen every month by a pediatric neurologist. While this would have been catastrophic for many families, Gamble’s son at least qualifies for Medicaid. The Gambles, who live in La Marque, a 20-minute drive from the University of Texas Medical Branch at Galveston, could always get the care they needed at UTMB.

“My son was born at UTMB,” Gamble says. “We’ve been going there all our lives.”

That, too, has been a typical story for thousands of Texans. For 118 years, UTMB’s mission of treating patients regardless of whether they could pay was proof that Texas’ health care system had a heart. Over the decades UTMB, the first public medical school and hospital in the United States, developed into a major academic health center-which ratcheted up the level of care. In rural, medically underserved counties, UTMB was a lifeline for sick Texans without health insurance.

Not anymore, say physicians, community health non-profits, medical students, and former UTMB patients such as Gamble. Hurricane Ike put 1 million square feet of the campus under 6 feet of saltwater and muck, causing $710 million in damage. The hospital’s emergency room is still shut. Hundreds of severely ill patients have been airlifted or sent by ambulance to Houston-area hospitals. To make matters worse for Galvestonians already suffering from layoffs, the health center’s president, Dr. David Callender, is focusing resources on a 64-acre specialty medical center at Victory Lakes, a well-off suburban enclave in League City on the border of Harris and Galveston counties. The aim is to attract wealthier, insured patients.

UTMB officials have blamed the hurricane for the hospital’s inability to serve people like Gamble and her family. But some physicians, former patients, and health advocates believe that Callender and the UT Board of Regents are using Hurricane Ike as an excuse to finish what they’d already started before the storm: shutting off access to uninsured and Medicaid patients because they are too costly, and unprofitable, to care for.

For six months, Gamble tried to make an appointment with the pediatric neurologist who used to see her son at UTMB. She was told that he was gone. They wouldn’t tell her where. The best Gamble could find was an adult neurologist who would take Medicaid in Houston. “It was a 45-minute drive to Houston every month,” she says. Recently she received good news. The same pediatric neurologist who had been treating Tevin at UTMB would see her son again, hospital officials told her. They didn’t explain further.

UTMB is no longer an option for Gamble herself. In October, she developed heart palpitations and tingling in her hands and feet. She can’t get a proper diagnosis because she can’t find a physician who will see her. UTMB won’t see anyone who is uninsured.

“I’m just going to wait it out,” she says. “I don’t have any other choice.”

Hurricane Ike dealt a terrible blow to UTMB. But hospital documents provided by the Texas Faculty Association show that UTMB had already stopped serving uninsured patients six weeks before the hurricane.

In 1998, UTMB President John Stobo appointed a committee of physicians, administrators, and staff to create restrictions on care for the uninsured. They called it the Demand Access Management Program, known as DAMP. The program was heralded in 2003 by The Wall Street Journal as “a rational, systematic solution to the problem of unlimited demand for access to UTMB services at a time of limited resources.”

Since DAMP’s genesis, hospital administrators have continued to decrease the number of uninsured patients served by UTMB. Some physicians and health advocates see this as abandoning UTMB’s historical legacy of caring for those most in need.

Ned Snyder, a professor of internal medicine in UTMB’s Division of Gastroenterology, was one of the doctors tasked with deciding who would get care. Stacks of referrals would stream in from other health care providers, UTMB clinics, and rural counties across the state. “We were given quotas: Less than 20 percent of our patients could be indigent,” Dr. Snyder says.

The Galveston County Health District reported it had little success in getting patients admitted through DAMP. In 2007, the districts’ two primary health clinics referred 817 people during the second quarter of 2007 (April to June) to see specialists at UTMB; 23 percent, according to Galveston County, were accepted.

Snyder says the stacks of referrals kept getting smaller over the last two years. This past August, they disappeared altogether. “I realized it had been a couple of weeks since I had seen any referrals through the DAMP program,” he says. “I started making inquiries and was told that it had been discontinued in August.”

Like many, Synder is troubled by the shift in emphasis at UTMB. In the 1970s, Snyder got his M.D. there. After three decades of private practice, he chose to come back in 2002 to care for Texans in need. Raised in a small town, the son of a small-town doctor, Synder always considered it his mission to serve residents of rural Texas whether they were bankers or uninsured laborers. Most patients from small-town and rural Texas with complicated medical problems eventually found themselves at UTMB-Galveston, he says.

After the discontinuation of DAMP in August, Snyder wrote an op-ed in the Galveston County Daily News describing his concern with UTMB’s move to Victory Lakes and away from caring for those least able to pay. Snyder wrote: “When an area is over doctored and over hospitaled costs go up and quality goes down, and the uninsured receive less, not more care. UTMB is using most of its energy and resources for entering suburban Houston. … UTMB has been steadily moving away from its original model that focused on overall needs, and that is in itself a tragedy.”

Snyder says UTMB’s attitude toward treating the uninsured had begun to change in 2006. That’s when then-President John Stobo hired the Houston-based Navigant Consulting Group to examine the hospital’s financial situation. “We thought we were doing great,” Snyder says, “and then suddenly they started letting people go and we were a failing institution.”

In a May 6, 2006, op-ed for the Galveston County Daily News, Stobo said the hospital was in the black. UTMB, he said, had “successfully addressed a series of financial challenges, including significant budget cuts from the state, decreasing reimbursement from Medicare and Medicaid, and medical inflation increasing at twice the inflation rate.”

But UTMB was reeling from steep budget cuts made by the Texas Legislature in 2003. Looking at a $10 billion budget deficit, legislators began to eliminate programs across the state. At UTMB, the $20 million per year in unclaimed lottery money that the Legislature had appropriated for indigent health care was cut in half. The Legislature also cut another $31 million through Medicaid rate reductions and the elimination of the Medicaid Graduate Medical Education program. Stobo’s administration was still moving full steam ahead, however, with its $61 million specialty care center near Victory Lakes.

Four months later, in September 2006, the Navigant report was completed, and Stobo was singing a different tune. He told the Daily News that the hospital had a $20 million annual operating deficit. Stobo announced that UTMB would have to let go 1,000 employees through layoffs, attrition and early retirement.

One focus of the Navigant report was DAMP. “Through DAMP,” the consultants wrote, “the UTMB medical community has successfully placed controls on access for new patients except in the Emergency Department”-where, by law, the uninsured have to be admitted. The consultants ended their assessment thusly: “The value of the DAMP program is measured in respect to number and percent of persons denied access to care.”

Hospital documents show officials in July 2008 working up a telephone script to help administrative staffers turn away uninsured patients. In e-mail messages sent to UTMB’s top administrators, Beverly Dowling, interim assistant vice president for Community Health Networks and manager of DAMP, suggested responses to potential complaints from rejected applicants. Among the anticipated complaints: “You are trying to kill me,” and “If you do not take me I will die.”

According to Dowling’s message, UTMB’s response would be as follows: “I hear you and I know that you are frustrated. The UTMB health system is currently caring for as many unsponsored patients as we can. Unfortunately, we have exhausted the funding available for unsponsored care and are unable to accept any more new patient referrals at this time. I encourage you to call your PCP/referring physician or your local county office for help with your immediate health care needs.”

UTMB ultimately posted a $614,000 deficit in its 2008 financial report. Meanwhile, UTMB was authorized by the UT Board of Regents to spend $10 million in cash buying an additional 29 acres for the Victory Lakes medical facility. The cash came from funds generated by treating patients at the hospital and clinics, money that would normally be designated to pay faculty who treat the uninsured. UTMB had now purchased 64 acres in League City all told-just 20 acres less than the campus on Galveston Island.

In a July 16, 2008, e-mail message, former CFO Larry Revill wrote to President David Callender and Provost Garland Anderson, “Another thing to consider would be to shift the funding source of Victory Lakes from cash to debt financing. This would definitely help our cash position but we would have to jump through some hoops at System and get BOR (Board of Regents) approval. I doubt you want to do this, but if you want to let me know.”

Chris Ott, in UTMB’s finance office, wrote back that “the BOR did not authorize the financing of the land but only the purchase be made with MSRDP funds” (faculty salary and incentive funds, that is).

Asked why UTMB shut down DAMP in August, Dowling would only tell the Observer, “the University made the decision not to accept any more unsponsored referrals excluding Pediatrics and Cancer referrals which were reviewed through the normal process.”

(Questions to UTMB officials as to why DAMP shut down, and when it might open back up in some form, also remain unanswered.)

An e-mail message dated July 9 from Dowling to Christine Keating, chief operating officer of clinics, demonstrates the phasing-out of care for the uninsured and indigent. Dowling reported that referrals in June were down 20 percent from the previous year and that the percentage of patients accepted through DAMP had dropped from 62 to 56.

On July 17, Keating forwarded the summary to Mike Hill, executive director of UTMB’s hospitals and clinics. In the message, Keating recounted a conversation with Karen Sexton, interim vice president and CEO of the hospital. “Karen talked about stopping DAMP consults for the next two months,” Keating wrote. “I don’t think this will be a big deal. What do you think?”

By Aug. 4, Sexton’s recommendation had apparently gone into effect. Then came September.

Hurricane Ike swamped UTMB’s John Sealy Hospital and its emergency room. The hospital’s specialty doctors evacuated and scattered across Texas. At least 2,500 UTMB physicians and staffers were laid off two months after the storm. Another 600 quit.

After the storm, UTMB officials changed the telephone script. “We regret to inform you that [your] UTMB physician will be discontinuing his/her professional relationship with you due to the devastation caused by Hurricane Ike.”

Six months later, UTMB has yet to reopen its emergency room-the primary gateway for most of the hospital’s uninsured patients. At a March 10 Board of Regents meeting, President Callender told the regents that UTMB hoped to reopen the hospital ER by this summer. The hospital, he reported, currently had 180 to 250 patient beds open for non-emergency cases. Asked whether they had admitted any uninsured patients, Callender told the board UTMB had not.

Callender also said that after Ike, UTMB had expanded its clinics in northern Galveston County near the Houston suburbs and its Victory Lakes complex. “These clinics have a very different payer mix with mostly Medicare and commercial insurance,” he said. “From the standpoint of the bottom line perspective it’s a very desirable group of patients.”

The closing of UTMB’s emergency room has had a devastating ripple effect across southeast Texas. Some emergency rooms in the Houston area have seen 25- to 40-percent increases in patient traffic. The nearest hospital to Galveston, Mainland Medical Center in Texas City, has been the hardest hit, with a 50-percent rise in the number of uninsured patients. Wait time for the ER has doubled.

The shuttering of UTMB’s ER also meant that the region lost one of its three Level 1 trauma centers for life-threatening injuries. For a seriously injured person on Galveston Island, the nearest Level 1 center is now 50 miles away in downtown Houston. Patients unable to endure an hour-long ambulance ride have to be airlifted, which runs between $12,000 and $15,000 per helicopter ride. Even with an airlift, precious minutes are lost in saving lives-including those of injured workers from offshore oil rigs, and chemical and refinery plants, who now have to be helicoptered to Houston.

The biggest impact has been on folks like Ronnie Hardison. Hardison, a 64-year-old man who lives in Galveston County, is about to lose both of his kidneys. He used to be a patient in UTMB’s DAMP program, paying $40 for monthly checkups and shots that boosted his kidney function. The shots were keeping Hardison from going on dialysis and ultimately needing transplants.

Since Hurricane Ike, UTMB won’t take Hardison. Looking elsewhere for help, “I’ve tried everyone from the Salvation Army to the Red Cross,” Hardison says. “No one can help me.” The shots he needs cost $1,500 to $2,000 a vial.

Hardison also lost his home to the hurricane. He and his two dogs are living in a small trailer. He’s trying to stay upbeat, he says, and trying to rebuild his home. But FEMA recently denied his claim for disaster assistance funds.

Recently, Hardison’s been feeling unusually tired. His back aches. He called the UTMB hotline to see when the DAMP program might start up again. “They told me there was nothing they could do to help me,” he says. “They are not renewing anybody’s cards.”

All told, 110 counties that lacked hospitals relied on the specialists and surgeons at UTMB to see their indigent patients. (Under state law, counties without a public hospital-the case in much of rural Texas-must spend up to 8 percent of their tax
revenues on indigent care.) Now these counties are scrambling to find hospitals and physicians that will treat their sickest residents.

Dr. Cecil Walkes, director of the Jefferson County Public Health Authority in East Texas, used to send 550 patients a month to UTMB. County health employees would drive them to the hospital every day. Now Walkes is struggling to find hospitals and private physicians to care for Jefferson’s indigent patients. “We can’t just sit around and wait until UTMB comes back online,” he says. “People get sick every day, and they need treatment quickly.”

Walkes has had some success getting local physicians to take his needy patients. Many of them are charging higher rates than UTMB. And Walkes hasn’t had much luck finding subspecialists for illnesses such as diabetes and heart disease. The county has had to send patients to cities like Houston, 90 miles away, which also costs more.

UTMB administrators used to meet with Walkes and other county indigent program officials regularly. He says there’s been no meeting since January. “They told us they were planning on opening a hospital with about 200 beds,” he says. “The feeling was that there wouldn’t be any room for our patients.” Walkes is resigned to coming up with a solution that won’t include UTMB.

That won’t be easy. The number of uninsured citizens in Jefferson climbs every year, and Walkes says people are getting sicker because they lack regular care. He recounts a recent case of a woman in her 30s suffering from vascular disease. The condition caused gangrene in her fingers. The woman was tossed from hospital to hospital in Jefferson County because she had no insurance. The ER was closed at UTMB. By the time she came to Walkes’ clinic, she had lost the tips of four fingers.

Walkes knows he will see an increasing number of cases. “The problem is only going to get worse,” he says, “with the economic situation as it is right now.”

UTMB’s drive to boost its profitability at the expense of treating those in need has created a schism among the hospital’s administrators, doctors, and medical students. “The people who work here are committed to treating the indigent, prisoners and people who don’t have many advocates,” Snyder says. “Selfishly, they also come for teaching reasons because the patient population has so many difficult problems.”

Anand Bhat, a third-year UTMB student, says he was attracted to the hospital for all those reasons. “There are a lot of rare diseases and interesting cases for a medical student to study,” he says. Before the hurricane, Bhat was scheduled to begin working in the 100-bed prison hospital at UTMB.

The university says it’s still “committed to serving the indigent,” Bhat notes. If that’s true, he asks, “why did they shut down DAMP before the hurricane?”

The decision by UTMB officials to shut their doors on the uninsured looks cold and clinical. But UTMB is not alone. Indigent care is growing more and more expensive; in 2008 UTMB spent $120 million serving uninsured people. So hospitals across the country are looking for ways to lower the number of uninsured patients being admitted into their ERs. In some cases, patients like the woman with gangrene in her fingers are told their cases are not serious enough for ER admittance. In other cases, they are diverted from hospital to hospital.

Still, hospitals close every year, inevitably citing the mounting costs of covering the uninsured. In 2005, New Orleans’ fabled Charity Hospital, which served Louisiana’s uninsured and, like UTMB, was also a teaching hospital, shut down in the wake of Hurricane Katrina. Charity has yet to reopen.

Ron Cookston heads Gateway to Care, a nonprofit that finds health care for uninsured people in Harris County. He has seen demand for his group’s services rise sharply since Gateway was created in 2000. “When I started we had an uninsured rate of 23 percent in Harris County. It’s now up to 32 percent,” he says. “We are hearing from a lot of people we never thought we’d hear from. People who are middle class but can’t afford health insurance. People on Medicaid but the reimbursement rates are so low that no physician will see them.”

Meanwhile, hospitals are vying for a dwindling group of younger, higher-income, well-insured patients who can bump up their bottom lines. In the wealthier suburbs of Houston, conglomerates such as Memorial Hermann are constructing new hospitals providing services such as robot-assisted surgeries and bariatric weight-loss surgery.

“You don’t see anyone building hospitals in the Fifth Ward,” Snyder says, referring to one of Houston’s poorer neighborhoods. “All the academic health centers are doing the same thing. Instead of looking at the needs of the state or the community, they are looking at the bottom line. An increasing amount of money that funds a medical school or academic center has to come out of patient care funds. It used to come from foundations, the state or federal government.”

Since UTMB is state-owned, the Legislature requires that it return to the state its federal Medicaid Disproportionate Share and Upper Payment Level funding, provided to hospitals that treat a large number of uninsured. In 2008, this came to $90 million; it is projected to reach $118 million in 2009.

On a late February Friday afternoon, UTMB is eerily quiet. From the outside, the campus shows few signs of damage, except for a MASH-style Quonset hut on the east side of campus that houses the cafeteria. Inside the facility, though, it’s a different story. Everything on the bottom floor of the hospital has been gutted, including the gift shop, pharmacy, cafeteria, and laboratory. Lines of blue tape stretch horizontally along the walls. Giant fans air out the hallways to prevent mold from spreading.

In his fifth-floor office, pediatrician Ben Raimer sits surrounded by photographs of political leaders like President George H.W. Bush and his son, George W., pictured with wife Laura during his governorship. A longtime UTMB official, Raimer currently oversees the DAMP program as vice president of the Office of Community Health Services.

Asked about the layoffs of more than 2,400 UTMB employees after Hurricane Ike and the downsizing of the hospital from 550 to 200 beds, Raimer says they were difficult decisions UTMB was forced to make because of its financial troubles.

“You have to put yourself in the shoes of the Board of Regents and Dr. Callender,” he says. “Our hospital and clinics generated 59 percent of our revenue.” With the hospital shuttered after the hurricane, “where do you get the money to pay everyone? The plan to open 200 beds and lay off people was regrettable but it had to be done.”

Raimer says he doesn’t know why another 600 employees quit during those four months after Ike; normally, he says, the hospital has a turnover rate of 80 or 90 a month. “I don’t know how many were disillusioned and left, or lost their homes and could no longer live here,” he says.

Asked about moving hospital services off Galveston Island to mainland suburbs like Victory Lakes, Raimer is unapologetic. “If you opened a Macy’s, where would you put it?” he asks. “If the state chooses not to fund the uninsured, then there is no alternative but to look for a better market share.

“I hate to look at health care as a commodity,” Raimer says, “but you can’t get away from the financial bottom line. If we shut down, it doesn’t do anybody any good.”

Raimer says the hospital was losing money even before Hurricane Ike. “We’ve not been in the black for several years,” he says. That, he says, is why DAMP was used to limit access for the uninsured even before the storm. “We were in the red.”

At the March 10 Board of Regents meeting, President Callender promised that UTMB’s administration was committed to staying on the island. “Because of funding sources and political issues … the island is the best solution,” was how Callender put it. He warned, however, that without adequate funding from the Legislature, UTMB would have to leave Galveston. “What we need is funding support. If we can’t financially sustain beds on the island, then we are forced to look off the island,” he told the board.

When Callender mentioned “political issues,” he was more than likely referring to state Rep. Craig Eiland, a Democrat who represents Galveston Island. Eiland was recently appointed speaker pro tem in the House of Representatives-the second-most powerful position behind the speaker. Eiland is determined that UTMB stay on the island.

While the Board of Regents has to approve any land purchases or financing for UTMB, it’s the Texas Legislature that provides a large share of its funding. Which makes Eiland optimistic. He points out a number of funding opportunities for UTMB that the Board of Regents had not considered for the Galveston campus. “They didn’t consider the FEMA money,” for one. Out of $600 million in federal funds for reconstruction, Eiland says, “only $125 million can be used on the mainland.”

Eiland says the regents had not considered Galveston’s Sealy & Smith Foundation, which has given $600 million to the hospital since it was created in 1922. “They can only give money for health care on the island,” Eiland points out. John and Jennie Sealy Smith, the children of John Sealy, a 19th-century Galveston entrepreneur and one of the richest men in Texas, established the foundation. Sealy & Smith money has been used to construct more than 50 percent of the buildings on the campus, including, of course, Sealy Hospital.

The UT system has been starving UTMB for years, Eiland says. “There are two parts to the story,” he says. “The state of Texas has not properly funded UTMB, especially in the last six years. And the Board of Regents have sat by and let it happen, without pounding the table and yelling and screaming about the unfair treatment of their first-born child.”

Disparities in funding UTMB and the UT Southwestern Health Science Center in Dallas have raised Eiland’s eyebrows. Since 2003, he says, “UTMB’s funding is 8 percent less in real dollars and UT Southwestern’s funding has increased by 30 percent. How do you as a UT regent not make an issue of an almost 40-percent discrepancy in state funding over a six-year period?”

Some critics have noted that Galveston Island is a perilous place for a major medical center-as Hurricane Ike demonstrated. Eiland has filed an appropriations bill that he says will allow UTMB to be rebuilt so that it can withstand future hurricanes. He notes that the new $174 million national biodefense laboratory on the UTMB campus weathered Ike with no damage.

Eiland’s plan would leverage $200 million in local funds from the Sealy & Smith Foundation to draw down $354 million from the state’s Rainy Day Fund. That money would then be coupled with the $600 million from FEMA to repair and renovate Sealy Hospital and construct a new hospital with surgical operating rooms. The funds would also be used to reinforce the campus and hospitals to withstand hurricanes. In all, Eiland’s plan would add up to 428 hospital beds-close to the 500 beds before Ike-with an additional 100 beds, as before, for the Texas Department of Criminal Justice’s prison hospital.

Eiland sat in the audience at the March 10 meeting while UT’s new chancellor, Francisco Cigarroa, read from a resolution supporting Eiland’s plan. “I’m pleased,” he said afterwards, “because now we are all on the same page.”

The larger reason for hope, Eiland says, rests with the Obama administration easing the national health care mess that has contributed so much to UTMB’s struggles. “Wouldn’t it be terrible if we moved UTMB because we didn’t want to treat working people who can’t pay their medical bills,” he says, “and in three or four years we have some type of system such as national health care to help them pay their bills? That would solve UTMB’s problems.”

Melissa del Bosque is a staff writer and a 2015-16 Lannan Fellow at The Investigative Fund.